In order to get your retirement income hassle-free, you need to pay FICA taxes. what is that? Part of the contributions employers withhold from their workers under the Federal Insurance Contributions Act (FICA). The current standard was approved in 1935. These tax contributions allow us to directly fund Social Security and Medicare programs. FICA tax is the difference between withholding and your regular monthly salary. This amount of money is automatically reflected in your purchasing power. The tax burden is primarily used to replenish the reserves of the Social Security benefit program for retirees. The same thing happens when you shift your budget in favor of medical insurance.
If you work and pay FICA taxes, you get credits that can be applied to your own retirement checks. If you intend to claim the Social Security Credit this year, you must earn at least $1,640.00 USD and, of course, pay the aforementioned tax.
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You can earn up to four credits per year if you earn at least $6,560.00 USD. Once you’ve earned 40 credits, you’ll be eligible to receive Social Security retirement benefits starting at age 62, at a minimum.
Paying FICA taxes also has other benefits. For example, you qualify for life insurance and disability benefits.
Regarding the payment of this tax, you should know that it is divided into two parts, Social Security Tax and Medicare Tax. The Social Security tax rate for 2023 is 6.2% of wages and the Medicare tax rate is 1.45% of wages. In short, for every $100.00 USD of income you pay $6.2 USD to Social Security and $1.45 USD to Medicare.